Empire strives to provide reasonable rates

Graph provided by Empire Electric

By Bobbe Jones

Most of us dread seeing a rate change letter come in the mail. In December, you received such a letter from Empire Electric Association's General Manager Neal Stephens notifying members of an increase in wholesale rates and a rate design change. The notification stated that the average residential customers will see no increase on their electric bill. While this is true for the average residential consumers, others will see increases and some will see decreases on their electric bill. So, how will you know what to budget for your electric bills in 2013?

First, let's talk about the 4.9 percent increase in the price of purchased power passed on to EEA from its wholesale provider, Tri-State Generation and Transmission Association. To put this into perspective, this increase represents about 78 percent of EEA's cost of doing business. If EEA opted to recover all of Tri-State's 4.9 percent increase in wholesale power, it would have raised its rates 3.83 percent on average. Instead, EEA is absorbing 2.22 percent of the rate increase, mostly from decreased labor and labor overheads. For EEA's membership, this means that the actual average increase in revenue in 2013 is projected at only 1.61 percent.

To understand how this increase is passed on to you, let's look at a few changes to your 2013 billing statement. These changes are a result of the recommendations made to EEA's board following an extensive cost of service study that included Tri-State's 2013 rate changes. We want you to understand what they mean.

In order to be as fair as possible to all EEA's customers and avoid subsidization within a customer class, the rates are designed to recover costs through two different components: (1) customer-related costs or the fixed costs of providing electric service, and (2) variable costs or the energy charge represented by kWh rates. With fixed and variable costs properly segregated, EEA is able to recover its fixed costs and margin regardless of how much energy the customer does or does not consume.

With this in mind, a line item change was made on your billing statement. The Pre-2013 line item, called a Basic Charge, recovered some but not all of EEA's fixed cost, thus allowing for subsidization within a customer class. This worked for decades, while the customer base grew.

Now that the economy has slowed, this rate has been adjusted to recover the actual fixed costs. It is now called a Facilities Charge. The Facilities Charge increased to recover the cost of EEA doing business and to help eliminate subsidies within rate classes. It is a truer and more transparent rate than the Basic Charge.

How will this change affect your bill? As an example, the residential 2012 Basic Charge was $19.50 per month. If we compare it to the new Facilities Charge at $30.73 per month, we see an $11.23 increase in your bill ... or do we?

When you go a step further and look at the Energy Charge line item that represents the actual kilowatt hours used, you'll see a different story. Again, using the residential rate as an example, the 2012 Energy Charge was $0.11271. But in 2013, the Energy Charge dropped to $0.09599. This is a 14.8 percent decrease.

With an increase in the Facilities Charge and a decrease in the Energy Charge, how will your bill fare in 2013? As your notification letter stated, the average residential customer using 672 kWh per month will see virtually no difference in their 2013 electric bill. If your household uses less than the average 672 kWh per month, you'll see a slight increase in the bill. Conversely, if your household uses more than the average 672 kWh per month, you'll see a decrease in the bill.

The included table reflects comparisons from the 2012 rates to the 2013 rate with different kWh usage. If your 2013 usage is similar to 2012, this table can help you predict your electric bill.

If you want to learn more, please visit our website at www.eea.coop or call us at 565-4444.

Bobbe Jones is the Assistant Member Services Manager with Empire Electric, 801 N. Broadway, Cortez. Empire Electric Association is working with the community to save energy and money.